EKIP– Expert Club for Economics and Politics A Different Opinion
The rhetoric of leftist movements is often punctuated by arguments about inequality. Their strongest populist theses are based precisely on social phenomena, presented as “social inequalities” that should be corrected through the power of the state apparatus and regulatory coercion. The reason for using this type of populism is that it allows for the easy capitalization of significant political influence, since “inequalities” usually affect large social groups that easily lend their support to those who undertake (or at least promise) to eliminate them.
The fight against inequalities is materialized through a wide range of policies, which most often fall into the category of so-called "positive discrimination" - imposing higher taxes on the rich, which should increase budget spending on benefits for the poor, introducing quotas for minority groups in universities, even subsidies for industries considered uncompetitive.
The latest such measure comes from Germany and concerns the place of women in the workforce. The EU has long [1] considered the dominance of male individuals in management positions in companies to be a problem, with the goal of women being 40% of management staff by 2020. Similar regulations have already been imposed in Norway, France, Spain, and since 2016, a requirement for at least 30% women on the management boards of large companies has come into force in Germany.
This policy rests on several false assumptions. The first, and most fundamental, is that women in the workforce should enjoy some special rights that men do not. This way of thinking demonstrates the inconsistent thinking of the regulator – in all other situations (except for motherhood and child custody) the law treats women and men equally, but when it comes to their position on the boards of large companies, gender turns out to be a characteristic on which the law discriminates. [2]
Another misconception is that women and men are interchangeable and have the same skills and competencies, and the only reason why managers are men is because of discrimination. Perhaps according to the regulator in Germany, board members are not selected based on their abilities and experience, but only on their gender – an assumption that sounds absurd.
The third false assumption is typical of most business and labor market regulations. The state (and left-wing movements that fight for the introduction of positive discrimination measures) view companies and businesses as a job-creation machine. And to the extent that businesses do indeed perform the “social function” of providing jobs, they are not created by regulation, but are the result of a contract between employer and employee. For this reason, companies are not able to provide the state with the specific type of employment that it considers necessary. The assumption that the regulator knows better than the management of a company what employees it needs is, to put it mildly, untenable.
What will this measure lead to? The experience of Norway, as the country that introduced such a regulation the longest, shows that the number of women on management boards, regardless of the requirements, does not increase significantly. [3] In some extreme cases, it is likely that some companies will exit the market or delist from the German stock exchange in order to avoid having to comply with the requirement. As with all other regulations, businesses will find a way to circumvent them or provide the state with some proof of compliance and continue to operate as before.
The price of populism will be paid by business as usual. Companies are likely to have to include less experienced and qualified employees on their boards [4], as well as encounter problems in implementing their corporate policies.
The main problem here, however, is quite different – the introduction of such quotas, restrictions and other forms of positive discrimination is a sign that demands for intervention and regulation in all spheres that were until recently beyond the reach of state control are likely to be implemented in the future, especially since they enjoy significant political support. And this will only distort the labor market and is unlikely to increase the real well-being of representatives of a specific gender.
[1] See http://ime.bg/bg/print/type:article/id:6831/
[2] Ironically, no such legislation is being considered for other traditionally male activities, such as coal mining.
[3] http://www.economist.com/news/business-and-finance/21636284-germanys-new-proposals-risk-damaging-gender-equality-workplace-regulation-too-far
[4] As the Norwegian experience shows: see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364470
I read somewhere next to the sentence "First and most fundamentally, women in the workforce should enjoy some special rights that do not apply to men". And before that we read: "The EU has long considered the dominance of male individuals in management positions in companies as a problem". This alone is enough to see that the author is not at all familiar with the topic he has undertaken to comment on; or he is familiar with it, but is lying to the readers here. It is not true that the EU considers male dominance per se. The EU does this in light of the proportion of women with higher education who leave universities. Given that universities produce more women than men with higher education, as well as considering the individual cases confirming the existence of a "glass ceiling", the EU considers discrimination against women, of which the mentioned facts are indications, as a problem. The author neither presents nor comments on this. On the contrary - he conveniently keeps quiet about it, depriving us even of the due reasonable explanation for these facts.